Spectra Energy Reports Third Quarter 2012 Results - Reported net income from controlling interests of $179 million, $0.27 earnings per share (EPS), compared with $254 million, $0.39 EPS, in the prior year quarter. - Third quarter 2012 earnings in line with company expectations, except for the effects of lower commodity prices. - Lower commodity prices expected to affect full year results; remain focused on longer term with at least $20 billion in expansion opportunities through the end of the decade. - Quarterly dividend increased to $0.305 per share - representing a $0.10 or 8.9 percent increase in annual dividend. PR Newswire HOUSTON, Nov. 1, 2012 HOUSTON, Nov. 1, 2012 /PRNewswire/ -- Spectra Energy Corp (NYSE: SE) reported 2012 third quarter net income from controlling interests of $179 million, or $0.27 diluted EPS, compared with $254 million, $0.39 diluted EPS, in the prior year quarter. Ongoing net income from controlling interests for the 2012 quarter was $179 million, or $0.27 diluted EPS, versus $247 million, $0.38 diluted EPS, in the prior year quarter. (Logo: http://photos.prnewswire.com/prnh/20061030/CLM051LOGO ) "Spectra Energy's fee-based businesses continued to generate strong earnings and cash flows, helping to lessen the effects of lower commodity prices," said Greg Ebel, president and chief executive officer, Spectra Energy Corp. "Industry fundamentals and our commitment to delivering superior total shareholder return remain strong, as underlined by our action to increase the quarterly dividend, effective with the fourth quarter 2012 payment. Looking ahead, we remain confident in our ability to secure and deliver growth for our investors through realizing at least $20 billion in expansion projects by the end of the decade," he said. BUSINESS EXPANSION UPDATES Currently, Spectra Energy is executing on $8 billion of expansion projects, and the company is already realizing benefits from projects going into service. In the U.S., the Philadelphia Lateral and TEAM 2012 projects are now in service and generating revenues. Additionally, the NJ-NY Expansion kicked off construction in the third quarter and is on track to enter service in late 2013. In Western Canada, the T-North 2012 Project is slated for a fourth quarter 2012 in-service, and construction of the Fort Nelson North plant will be completed in the fourth quarter of 2012, with the project going into service early next year. Spectra Energy also recently announced an agreement in principle to acquire a one-third interest in the Sand Hills and Southern Hills Pipelines, both of which are currently under construction by DCP Midstream LLC (DCP Midstream), a 50/50 joint venture between Spectra Energy and Phillips 66. The transaction is expected to close by the end of November. Upon closing, Spectra Energy, Phillips 66, and DCP Midstream each will own a one-third interest in the two natural gas liquids pipelines. The company also has made good progress on its $20 billion project backlog. During the third quarter, Spectra Energy entered an agreement with partners DTE Energy and Enbridge to build the NEXUS project, which will move growing supplies of Ohio Utica shale gas to markets in Ohio, Michigan and Ontario, Canada. The agreement also provides Spectra Energy a 20-percent ownership in Vector Pipeline upon completion of the project. Spectra Energy's AIM project, which will expand capacity of the company's Algonquin system, is in the midst of an open season and is receiving high levels of interest. And lastly, in Western Canada, Spectra Energy recently announced plans to jointly develop, with BG Group, a new natural gas pipeline from northeast B.C. to BG Group's proposed LNG export facility in Prince Rupert. This new opportunity will leverage surplus B.C. natural gas supplies and facilitate its export to high-demand international markets. SEGMENT RESULTS U.S. Transmission U.S. Transmission reported third quarter 2012 earnings before interest and taxes (EBIT) of $238 million, compared with $235 million in third quarter 2011. Quarterly EBIT results reflect increased earnings from expansions and lower operating costs. These benefits were partially offset by lower processing revenues and, as anticipated, lower storage revenues. Distribution Distribution reported third quarter 2012 EBIT of $55 million, compared with $50 million in third quarter 2011 mainly due to higher short-term transportation revenues. Western Canada Transmission & Processing Western Canada Transmission & Processing reported third quarter 2012 EBIT of $83 million, compared with $119 million in third quarter 2011. This $36 million decrease in EBIT was driven by a $43 million reduction at the Empress natural gas liquids business, attributable to lower NGL prices. These results were partially offset by improved results in the gathering and processing business, driven by higher contracted volumes from expansions in the Horn River and Montney areas of British Columbia. Field Services Field Services reported third quarter 2012 EBIT of $62 million, compared with $134 million in third quarter 2011. This $72 million decrease in EBIT was driven by an approximately $90 million reduction due to lower natural gas liquids and natural gas prices. Also reducing EBIT were higher planned repairs and maintenance costs as a result of asset growth. Partially offsetting these reductions were gains associated with unit issuances by DCP Midstream's master limited partnership and a reduction in depreciation expense, as previously reported. During the third quarters of 2012 and 2011, respectively, NGL prices averaged $0.72 per gallon versus $1.24 per gallon, NYMEX natural gas averaged $2.81 per million British thermal units (MMBtu) versus $4.19 per MMBtu, and crude oil averaged approximately $92 per barrel versus approximately $90 per barrel. DCP Midstream paid distributions of $25 million to Spectra Energy in third quarter 2012. Other "Other" reported net costs of $29 million and $23 million in the third quarter 2012 and 2011, respectively. Other is comprised primarily of corporate costs, including benefits and captive insurance. Interest Expense Interest expense was $159 million for third quarter 2012, compared with $157 million for third quarter 2011. Income Taxes Third quarter 2012 income tax expense from continuing operations was $72 million, compared with $108 million reported in the third quarter of 2011. The lower tax expense was driven by lower earnings and a lower Canadian effective tax rate. The effective tax rate was 26 percent in the third quarter of 2012, compared with 28 percent in the third quarter of 2011. Reconciliation of Reported to Ongoing Net Income – Controlling Interests ( in millions) Quarters Ended September 30, 2012 2011 Net Income – Controlling Interests as Reported $ 179 $ 254 Adjustments to Reported Net Income – Controlling Interests: Discontinued Operations – (7) Ongoing Net Income – Controlling Interests $ 179 $ 247 Reconciliation of Reported to Ongoing Diluted EPS Quarters Ended September 30, 2012 2011 Diluted EPS as Reported $ 0.27 $ 0.39 Discontinued Operations – (0.01) Diluted EPS, Ongoing $ 0.27 $ 0.38 Additional Information Additional information about third quarter 2012 earnings can be obtained via the Spectra Energy Web site: www.spectraenergy.com. The analyst call is scheduled for today, Thursday, November 1, 2012, at 8:00 a.m. CT. The webcast can be accessed via the Investors Section of Spectra Energy's Web site or the conference call can be accessed by dialing (888) 252-3715 in the United States or Canada, or (706) 634-8942 for International. The conference code is "40011318" or "Spectra Energy Quarterly Earnings Call." Please call five to ten minutes prior to the scheduled start time. A replay of the call will be available until 5:00 p.m. CT, February 1, 2013, by dialing (855) 859-2056. The international replay number is(706) 634-8942, with above conference ID. A replay and transcript also will be available by accessing theInvestors Section of the company's Web site. Non-GAAP Financial Measures We use ongoing net income from controlling interests and ongoing diluted EPS as measures to evaluate operations of the company. These measures are non-GAAP financial measures as they represent net income from controlling interests and diluted EPS, adjusted for special items and discontinued operations. Special items represent certain charges and credits which we believe will not be recurring on a regular basis, and discontinued operations do not represent our ongoing core business. We believe that the presentation of ongoing net income and ongoing diluted EPS provide useful information to investors, as it allows them to more accurately compare our ongoing performance across periods. The primary performance measure used by us to evaluate segment performance is segment EBIT from continuing operations, which at the segment level represents earnings from continuing operations (both operating and non-operating) before interest and taxes, net of noncontrolling interests related to those earnings. We consider segment EBIT, which is the GAAP measure used to report segment results, to be a good indicator of each segment's operating performance from its continuing operations as it represents the results of our ownership interest in operations without regard to financing methods or capital structures. We also use ongoing segment EBIT and Other EBIT (net costs) as measures of performance. Ongoing segment and Other EBIT are non-GAAP financial measures as they represent reported segment and Other EBIT adjusted for special items. We believe that the presentation of ongoing segment and Other EBIT provide useful information to investors, as they allow investors to more accurately compare a segment's or Other's ongoing performance across periods. The most directly comparable GAAP measures for ongoing segment or Other EBIT are reported segment or Other EBIT, which represent EBIT from continuing operations, including any special items. Forward-Looking Statements This release includes "forward-looking statements" within the meaning of Section27A of the Securities Act of 1933 and Section21E of the Securities Exchange Act of 1934. Forward-looking statements are based on our beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as: anticipate, believe, intend, estimate, expect, continue, should, could, may, plan, project, predict, will, potential, forecast, and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to: state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an effect on rate structure, and affect the speed at and degree to which competition enters the natural gas industries; outcomes of litigation and regulatory investigations, proceedings or inquiries; weather and other natural phenomena, including the economic, operational and other effects of hurricanes and storms; the timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates; general economic conditions, including the risk of a prolonged economic slowdown or decline, or the risk of delay in a recovery, which can affect the long-term demand for natural gas and related services; potential effects arising from terrorist attacks and any consequential or other hostilities; changes in environmental, safety and other laws and regulations; results and costs of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general market and economic conditions; increases in the cost of goods and services required to complete capital projects; declines in the market prices of equity and debt securities and resulting funding requirements for defined benefit pension plans; growth in opportunities, including the timing and success of efforts to develop U.S. and Canadian pipeline, storage, gathering, processing and other infrastructure projects and the effects of competition; the performance of natural gas transmission and storage, distribution, and gathering and processing facilities; the extent of success in connecting natural gas supplies to gathering, processing and transmission systems and in connecting to expanding gas markets; the effects of accounting pronouncements issued periodically by accounting standard-setting bodies; conditions of the capital markets during the periods covered by the forward-looking statements; and the ability to successfully complete merger, acquisition or divestiture plans; regulatory or other limitations imposed as a result of a merger, acquisition or divestiture; and the success of the business following a merger, acquisition or divestiture. These factors, as well as additional factors that could affect our forward-looking statements, are described under the headings "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Information" in our 2011 Form 10-K, filed on February 27, 2012, and in our other filings made with the Securities and Exchange Commission (SEC), which are available via the SEC's Web site at www.sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. All forward-looking statements in this release are made as of the date hereof and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Spectra Energy Corp (NYSE: SE), a FORTUNE 500 company, is one of North America's premier natural gas infrastructure companies serving three key links in the natural gas value chain: gathering and processing, transmission and storage, and distribution. For more than a century, Spectra Energy and its predecessor companies have developed critically important pipelines and related infrastructure connecting natural gas supply sources to premium markets. Based in Houston, Texas, the company's operations in the United States and Canada include more than 19,000 miles of transmission pipeline, approximately 305 billion cubic feet of storage, as well as natural gas gathering and processing, natural gas liquids and local distribution operations. The company also has a 50 percent ownership in DCP Midstream, one of the largest natural gas gatherers and processors in the United States. Spectra Energy is a member of the Dow Jones Sustainability World and North America Indexes and the Carbon Disclosure Project's Global 500 and S&P 500 Carbon Disclosure Leadership Indexes. For more information, visit www.spectraenergy.com. Spectra Energy Corp Quarterly Highlights September 2012 (Unaudited) (In millions, except per-share amounts and where noted) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 COMMON STOCK DATA Earnings Per Share From $ $ Continuing Operations, $ 0.27 $ 0.38 1.11 1.34 Diluted Earnings Per Share, $ 0.27 $ 0.39 $ $ Diluted 1.11 1.37 Dividends Per Share $ 0.28 $ 0.26 $ $ 0.84 0.78 Weighted-Average Shares 655 652 655 652 Outstanding, Diluted INCOME Operating Revenues $ 1,072 $ 1,123 $ $ 3,728 3,923 Total Reportable Segment 438 538 1,563 1,788 EBIT Income from Discontinued - 7 2 23 Operations, Net of Tax Net Income - Controlling 179 254 727 895 Interests EBIT BY BUSINESS SEGMENT U.S. Transmission $ 238 $ 235 $ $ 746 757 Distribution 55 50 281 305 Western Canada 83 119 315 373 Transmission & Processing Field Services 62 134 221 353 Total Reportable Segment 438 538 1,563 1,788 EBIT Other EBIT (29) (23) (83) (76) Total Reportable $ 409 $ 515 $ $ Segment and Other EBIT 1,480 1,712 CAPITAL AND INVESTMENT EXPENDITURES U.S. Transmission $ $ 651 534 Distribution 172 200 Western Canada 548 515 Transmission & Processing Other 47 56 Total Capital and $ $ Investment Expenditures, 1,418 1,305 Excluding Acquisitions Acquisitions (a) $ $ 30 390 September December 31, 30, 2012 2011 CAPITALIZATION Common Equity - 39% 39% Controlling Interests Noncontrolling Interests 5% 5% and Preferred Stock Total Debt 56% 56% Total Debt $ $ 12,490 11,723 Book Value Per Share (b) $ $ 13.15 12.39 Actual Shares 653 651 Outstanding (a) Represents 2012 payment of a portion of the purchase price previously withheld in connection with the acquisition of Bobcat and 2011 acquisition of Big Sandy natural gas pipeline system. (b) Represents controlling interests. Spectra Energy Corp Quarterly Highlights September 2012 (Unaudited) (In millions, except where noted) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 U.S. TRANSMISSION Operating Revenues $ $ $ $ 460 471 1,419 1,411 Operating Expenses Operating, Maintenance and Other 165 184 484 486 Depreciation and Amortization 70 69 211 203 Gains on Sales of Other Assets and - 4 3 8 Other, net Other Income and Expenses 40 40 103 103 Noncontrolling Interests 27 27 84 76 EBIT $ $ $ $ 238 235 746 757 Proportional Throughput, TBtu (a) 650 659 2,025 2,085 DISTRIBUTION Operating Revenues $ $ $ $ 269 276 1,188 1,347 Operating Expenses Natural Gas Purchased 50 60 425 556 Operating, Maintenance and Other 110 112 323 326 Depreciation and Amortization 54 54 159 160 EBIT $ $ $ $ 55 50 281 305 Number of Customers, Thousands 1,370 1,352 Heating Degree Days, Fahrenheit 295 246 3,994 4,948 Pipeline Throughput, TBtu 158 139 584 626 Canadian Dollar Exchange Rate, 1.00 0.98 1.00 0.98 Average WESTERN CANADA TRANSMISSION & PROCESSING Operating Revenues $ $ $ $ 348 392 1,143 1,202 Operating Expenses Natural Gas and Petroleum Products 81 86 304 275 Purchased Operating, Maintenance and Other 142 148 406 428 Depreciation and Amortization 50 46 145 140 Other Income and Expenses 8 7 27 14 EBIT $ $ $ $ 83 119 315 373 Pipeline Throughput, TBtu 158 180 490 529 Volumes Processed, TBtu 162 187 501 537 Empress Inlet Volumes, TBtu 121 145 401 455 Canadian Dollar Exchange Rate, 1.00 0.98 1.00 0.98 Average FIELD SERVICES Equity in Earnings of DCP Midstream, $ $ $ $ LLC 62 134 221 353 EBIT $ $ $ $ 62 134 221 353 Natural Gas Gathered and 7.2 7.1 7.1 6.9 Processed/Transported, TBtu/day (b) Natural Gas Liquids Production, 398 392 401 375 MBbl/d (b,c) Average Natural Gas Price Per MMBtu $ $ $ $ (d) 2.81 4.19 2.59 4.21 Average Natural Gas Liquids Price Per $ $ $ $ Gallon (e) 0.72 1.24 0.83 1.21 Average Crude Oil Price Per Barrel $ $ $ $ (f) 92.22 89.76 96.17 95.48 (a) Trillion British thermal units (b) Includes 100% of DCP Midstream volumes (c) Thousand barrels per day (d) Million British thermal units. Average price based on NYMEX Henry Hub (e) Does not reflect results of commodity hedges (f) Average price based on NYMEX calendar month Spectra Energy Corp Condensed Consolidated Statements of Operations (Unaudited) (In millions) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Operating Revenues $ $ $ $ 1,072 1,123 3,728 3,923 Operating Expenses 744 765 2,516 2,610 Gains on Sales of Other Assets - 3 2 7 and Other, net Operating Income 328 361 1,214 1,320 Other Income and Expenses 107 178 350 470 Interest Expense 159 157 471 471 Earnings From Continuing 276 382 1,093 1,319 Operations Before Income Taxes Income Tax Expense From 72 108 289 372 Continuing Operations Income From Continuing 204 274 804 947 Operations Income From Discontinued - 7 2 23 Operations, net of tax Net Income 204 281 806 970 Net Income - Noncontrolling 25 27 79 75 Interests Net Income - Controlling $ $ $ $ Interests 179 254 727 895 Spectra Energy Corp Condensed Consolidated Balance Sheets (Unaudited) (In millions) September 30, December 31, 2012 2011 ASSETS Current Assets $ $ 1,621 1,764 Investments and Other Assets 7,127 7,014 Net Property, Plant and Equipment 19,607 18,258 Regulatory Assets and Deferred Debits 1,227 1,102 Total Assets $ $ 29,582 28,138 LIABILITIES AND EQUITY Current Liabilities $ $ 4,023 3,101 Long-term Debt 9,892 10,146 Deferred Credits and Other 5,991 5,737 Liabilities Preferred Stock of Subsidiaries 258 258 Equity 9,418 8,896 Total Liabilities and Equity $ $ 29,582 28,138 Spectra Energy Corp Condensed Consolidated Statements of Cash Flows (Unaudited) (In millions) Nine Months Ended September 30, 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 806 $ 970 Adjustments to reconcile net income to net cash provided by operating activities 648 717 Net cash provided by operating 1,454 1,687 activities CASH FLOWS FROM INVESTING ACTIVITIES Net cash used in investing activities (1,450) (1,546) CASH FLOWS FROM FINANCING ACTIVITIES Net cash used in financing activities (35) (188) Effect of exchange rate changes on 3 (9) cash Net decrease in cash and cash equivalents (28) (56) Cash and cash equivalents at beginning of period 174 130 Cash and cash equivalents at end of period $ 146 $ 74 Spectra Energy Corp Reported to Ongoing Earnings Reconciliation September 2012 Quarter-to-date (In millions, except per-share amounts) Reported Earnings/ Ongoing Earnings SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS U.S. Transmission $ 238 Distribution 55 Western Canada Transmission & Processing 83 Field Services 62 Total Reportable Segment EBIT 438 Other (29) Total Reportable Segment and Other EBIT $ 409 EARNINGS Total Reportable Segment EBIT and Other EBIT $ 409 Interest Expense (159) Interest Income and Other 26 Income Taxes from Continuing Operations (72) Total Net Income $ 204 Total Net Income - Noncontrolling Interests (25) Total Net Income - Controlling Interests $ 179 EARNINGS PER SHARE, BASIC $ 0.27 EARNINGS PER SHARE, DILUTED $ 0.27 Weighted Average Shares (reported and ongoing) - in millions Basic 653 Diluted 655 Spectra Energy Corp Reported to Ongoing Earnings Reconciliation September 2011 Quarter-to-date (In millions, except per-share amounts) Reported Discontinued Ongoing Earnings Operations Earnings SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS $ $ $ U.S. Transmission - 235 235 Distribution 50 - 50 Western Canada Transmission & 119 - 119 Processing Field Services 134 - 134 Total Reportable Segment 538 - 538 EBIT Other (23) - (23) Total Reportable Segment and $ $ $ Other EBIT - 515 515 EARNINGS Total Reportable Segment EBIT and $ $ $ Other EBIT - 515 515 Interest Expense (157) - (157) Interest Income and Other 24 - 24 Income Taxes from Continuing (108) - (108) Operations Discontinued Operations, net of 7 (7) A - Tax $ $ $ Total Net Income (7) 281 274 Total Net Income - Noncontrolling (27) - (27) Interests Total Net Income - Controlling $ $ $ Interests (7) 254 247 $ $ $ EARNINGS PER SHARE, BASIC (0.01) 0.39 0.38 $ $ $ EARNINGS PER SHARE, DILUTED (0.01) 0.39 0.38 A - Primarily net revenues from Sonatrach settlement transactions. Weighted Average Shares (reported and ongoing) - in millions Basic 650 Diluted 652 SOURCE Spectra Energy Corp Website: http://www.spectraenergy.com Contact: Media: Caitlin Currie, +1-713-627-5353, +1-713-627-4747 (24-hour media line); or Analysts: John Arensdorf, +1-713-627-4600
Spectra Energy Reports Third Quarter 2012 Results
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